In the heat of summer 1997, Daimler Benz purchased Chrysler for 37 Billion Dollars in a reported business merger of equals. Now, nearly 10 years later DaimlerChrysler is selling Chrysler for a reported 7.4 billion dollars for 80% of the firm. If the increased loss of 30 Billion Dollars in business value is pretty good enough apparently the entire price being paid by the customer Cerberus will be placed into Chrysler and not maintained by Daimler.
How does this happen and what lessons can you learn when planning the sale, merger, or valuation of your privately kept business? When Daimler purchased Chrysler, Chrysler was having record revenues of 61 Billion Dollars and net earnings of 2.8 Billion Dollars. Revenues and income were growing rapidly. Exciting new products were eagerly accepted by the marketplace. The resulting projected cashflow would pay for the purchase.
Now, in 2007, Chrysler has profits of 62 Billion Dollars and a 1.5-Billion Dollar loss with no projected growth and no current cash flow for funding. This proves once more that cash flow is the foundation of traditional companies’ business value. To increase business value and business-merger sales price, increase your cash flow during the sale and lead-up period.
When Daimler bought Chrysler the car industry all together was having record years. The three American automakers were offering vehicles like hotcakes. Costs have been brought down to where Chrysler was an inexpensive company. Compare that to the present industry weakness with reviews of overcapacity, impending layoffs and inability to contend because of health care and retirement costs.
Yes, the entire industry cycles do matter in the prices of a business during sale. Sell on the up-cycle. Up-cycles provide prospective purchasers with cash to buy your business and up-cycles provide your business with profits to sell. When reports that Chrysler might be sold to hit the road, it was clear that Daimler was having a fire sale. Ideal for a buyer but an extremely tough negotiating position for a seller. Don’t wait until even the “business challenged” can let you know must sell. If you wait around too long before you begin the business sale or merger process with the bottom feeders will earn.
- Thank you for attending a meeting
- Those that are accountable for consuming the data (e.g. floor manager)
- Get the Legal and Tax Issues Correct the First Time
- Human Resource (HR) Department
- Enable software auditing
- Real improvement of work
When Daimler purchased Chrysler a new design center have been completed allowing Chrysler to bring vehicles on the marketplace in three years or less. This allowed them to contend with stylish exciting vehicles. Daimler, in order to milk profits, didn’t bring out a new car for 3 years to 2006 prior, destroying this design-command position.
People bought Chryslers because these were an affordable style, not because they lasted permanently. So what was left when there have been no new models? While some may question Chrysler’s brand value nobody can seriously question Jeep’s value. Jeep was very near to the Marlboro Man in American mystique. Yet Daimler let Hummer take Jeeps prized position as the “American Badlands 4 Wheel Drive Experience.” Daimler, in 2007, finally brought out a Hummer competitor – right with time for a spike in gas prices. Protect your brands and the value natural in them Always. Chrysler invented the minivan. Chrysler has some excellent minivans still.
Yet, in the day of the “crossover” or mix of SUV and Minivan, where is Chrysler’s admittance? What occurred to the look-studio room again? In the name of efficiency Daimler didn’t let Chrysler keep dancing the dance that got it to the ball. Within a merger originally billed as a relationship of equals it rapidly became clear that the superior equivalent was Daimler.